Greece 'will run out of cash by end of March'

Greece is burning through its cash reserves and will not be able to meet payment obligations beyond the end of March unless it secures additional funds from its creditors, according to a Reuters report.

The country remains locked in a battle with euro zone partners over the future of its bailout programme, which is due to expire in 10 days.

Failure to clinch a deal would leave it at risk of bankruptcy, though until now it had not been clear how much time Greece had until state coffers run dry.

It will submit a request to the euro zone tomorrow to extend a “loan agreement” for up to six months but EU paymaster Germany says no such deal is on offer and Greece must stick to the terms of its existing international bailout.

The move, confirmed by an official spokesman, is an attempt by the new leftist-led government of Prime Minister Alexis Tsipras to keep a financial lifeline for an interim period while sidestepping tough austerity conditions in the EU/IMF programme.

An EU source said whether euro zone finance ministers, who rejected such ideas at a meeting on Monday, accept the request as a basis to resume negotiations will depend on how it is formulated.

German Finance Minister Wolfgang Schaeuble poured scorn on the Greek gambit, saying: “It’s not about extending a credit programme but about whether this bailout programme will be fulfilled, yes or no.”

With the current bailout deal with the euro zone due to expire on 28 February, Mr Tsipras said talks were at a crucial stage and his demands for an end to austerity were winning support.

“There were protests across Europe supporting the moves made by Greece.

“We have managed for the first time through contacts with foreign leaders to create a positive stance on our requests,” he said at a televised meeting with President Karolos Papoulias.

EU officials said intensive consultations were under way between Greece, the Eurogroup of finance ministers and the European Commission, with Italy and France also involved in the search for a compromise.

Greece will be able to repay a €1.5bn loan from the IMF that falls due in mid-March, but the state will struggle to make payments after that despite continuing efforts to minimize cash needs, a Reuters source said.

“Greece can cover its needs until mid-March or the latest by the end of March unless it secures additional funding from official lenders,” the source told Reuters.

The Greeks have repeatedly asked their euro zone partners to be allowed to issue more Treasury bills beyond an existing €15bn ceiling that it has already hit but its request has been denied.

Adding to the pressure, budget data for January showed the state’s finances worsening sharply as Greeks held off on paying taxes ahead of the 25 January general election.

That resulted in a €1bn shortfall in tax revenues, 23% below the targeted level, putting the country’s bailout target of a 3% budget surplus this year in doubt.

Mr Tsipras’ government has sought to play down cashflow concerns, with ministers saying the state has enough money on hand and refusing to speculate on when it might run out.

Asked at a news conference today about the state’s cash reserves, Deputy Finance Minister Dimitris Mardas said: “We are trying to pay our obligations all the time, I don’t have anything else to tell you.”

US Treasury Secretary Jacob Lew warned Greece to move quickly to reach a deal with creditors on its bailout to avoid further economic difficulties.

In a call with Greek Finance Minister Yanis Varoufakis, the US Treasury said Mr Lew “noted that failure to reach an agreement would lead to immediate hardship in Greece, that the uncertainty is not good for Europe, and that time is of the essence”.

He “urged Greece to find a constructive path forward in partnership with Europe and the IMF to build on the foundation that exists to advance growth and reform,” the Treasury said.

Earlier, the conservative daily Kathimerini said cashflow projections showed government coffers would start to run dry as early as next Tuesday.

After the March IMF repayment, Greece faces €800m in interest payments in April followed by a major financing hump in the summer, when it has to repay about €8bn to official lenders including €6.5bn to the ECB for maturing bonds.

In addition, Greece also faces a monthly bill of €1.5bn for public sector salaries and pensions, and an additional €1bn a month for social security and healthcare costs.

Shut out of capital markets in 2010, Greece has survived over the past four and a half years on a continued stream of over €240bn in aid from the European Union and IMF.

It broke its four-year exile from bond markets in April last year amid signs that the worst of its debt crisis was over, but the return was short-lived as bond yields rose to unsustainable levels in the autumn when political tensions rose.

Greece’s government today offered debt forgiveness to thousands of individuals and companies that owe the state money, hoping to secure a fraction of arrears.

Junior finance minister Nadia Valavani said debtors offering to pay a minimum of €200 upfront could see a haircut of up to 50% on the rest of their debt.

Ms Valavani told a news conference that debts to the Greek state had ballooned to €76bn in unpaid taxes and social insurance contributions.

But realistically, just €9bn from that total can be recovered, she added.